The first home and the first home loan – what to look for

The first home may not be your dream home. See it as the first step onto the property ladder. Congratulate yourself. Home ownership is a rewarding journey. Be aware that if you want to turn it into financial success then you will have to invest; time, effort and / or money. If you’re good with DIY then that places you ahead already.

Decide what you’re buying the house for. If the property is for investment as well as a place to live then it’s important to think about its value as a rental property or its resale value, perhaps after you’re made some alterations (improvements). The banks will see rental property as a higher risk, but many home owners hang on to their first “live in” home and turn it into a rental.

There are some considerations that affect the value of the property.

  • Is it close to public transport?
  • Are shops and schools close by, preferably within walking distance?
  • Is it in a good suburb?
  • Is the suburb attractive to the rental market?

Get a builders’ report and a LIM

It’s always worth getting a professional to look over the house, even if it is relatively new and you don’t find and immediate issues yourself. An experienced builder or inspection company may find things that don’t immediately jump out at you. If you can get the report before the purchase then you can use it to negotiate price, or to get the issues resolved before the deal is settled.

The LIM report gives you some background on the property and the building. It identifies environmental factors such as drainage and landslip risks as well as information on scheduled roads, resource and building consents, even on whether there are outstanding rates on the property. Your lawyer will probably insist on a LIM report. The advice is simple: don’t buy a property without one.

Lawyers for your first home purchase

You will need a lawyer to look over any sale agreement or mortgage documents. The lawyer will also handle the “conveyancing” or transfer of the property into your name. As with anything legal, it’s good to get solid advice. At the same time you should be aware that conveyancing is not something that you should pay a fortune for, so unless there is some complexity in the transfer (e.g. trusts etc.), shop around.

Other costs associated with home ownership

  • There are some up-front costs that you’ll probably be able to anticipate. The deposit is just one of those costs.
  • Keep money aside for some other costs.
  • Moving in costs, possibly hiring  movers
  • Connection fees for internet, power and water
  • You may want to do some immediate renovations. Factor those into your up-front costs
  • If you want flatmates or tenants then there will be costs associated with finding the right ones.
  • Legal fees and fees for the building reports

Then there are the on-going costs: mortgage, insurance, rates, possibly body corporate fees etc. It’s a good idea to get full knowledge of all costs ahead of the purchase, so that there no surprises.